The Treasury sold 945.5 million liras ($524 million) of
June 2014 zero-coupon bonds at an average yield of 6.6 percent.
That compares with 5.71 percent in a March 12 sale of same-
maturity debt. The Treasury also sold 1.5 billion liras ($833
million) of 10-year fixed coupon bonds at an average yield of
7.27 percent today, compared with 7.23 percent in a March 19
sale of same-maturity debt.

“Banks have recorded windfall profits on bond positions
until February,” Yavuz Uzay, director of Turkey research at
Renaissance Capital in London, said in an e-mailed response to
questions today. “Since then, some of those gains have been
given back,” and “today’s selling that comes after the
Treasury auctions makes sense in this respect.”

Bank stocks are also being sold after the central bank cut
the upper limit of its interest rate corridor, increasing
pressure on loan yields, while low interest rates limit deposit
growth, Uzay said.

The central bank in Ankara cut the upper end of its
interest rate corridor, the overnight lending rate, to 7.5
percent from 8.5 percent on March 26, while leaving the lower
end, the overnight borrowing rate, unchanged at 4.5 percent. It
also left the benchmark one-week repurchase rate unchanged at
5.5 percent.

Turkish banking stocks have gained 8.3 percent this year,
compared with a 9.9 percent increase on the Istanbul bourse.
Yields on two-year benchmark notes rose 66 basis points in
March, the biggest increase among 16 emerging markets with two-
year local currency debt tracked by Bloomberg.